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Old 08-08-2019, 08:19 AM
6,098 posts, read 2,694,762 times
Reputation: 18561


Originally Posted by mathjak107 View Post
2008 -2009 were serious .... we had sold two manhattabn co-ops ... they went for just 10% less then the peak but our buyers had banks re-neg at closing when they had no money to loan out ... it happened to two different buyers at different banks ... it took 6 months to finally have banks come across with the funds after committing months earlier .

That's crazy. My in-laws live in Ft. Myers. I remember in 2007 and seeing full-page ads for 3-for-1 condo sales. Nice units, too. I knew the onslaught was coming at the time, but thought, "If I had $300K in spare cash, I'd totally do that. The snowbird rentals alone would provide cash flow." Then I'd have sold in about 2015.
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Old 08-08-2019, 09:57 AM
9,609 posts, read 4,218,026 times
Reputation: 1870
Originally Posted by GeoffD View Post
The usual economic toolbox to dampen the cycle is pretty empty. We already have historically low interest rates. The discount rate is 2.75%. It's not like the Fed can make it negative. We ran huge deficits in the good times. Piling on with even bigger ones risks collapsing the dollar. Good for Boeing and farmers. Bad for people who shop Walmart.

In the Great Depression, more than half the country had food security issues. The 2008 recession was nothing like that. Nobody was starving and lining up at soup kitchens. The unemployment rate when I entered the workforce in 1981 was higher than at the peak of the 2008 recession. A lot of media hype. Kind of like "superstorm Sandy" where peak winds were below 90 mph. That's a modest hurricane unless you're the weather channel.

I'd also point out that cash flow with the Social Security program is about to turn massively negative. Layer a recession on top of it where receipts from payroll taxes drop 10% and you already have a big spike in the budget deficit without doing anything. There's no room to do an Obama "fling money everywhere" policy.
Yes the Fed can go negative. I doubt we'll need or see it.

How are these deficits bad for the lower class? Deficits are one big way they get funded.

SS is a good example of safety and security in a recession. No one lost a dime of benefits with the 2008 crash.

There are less conventional ways to create new central moneys. I doubt we'll need or see it.
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Old 08-08-2019, 10:25 AM
8,990 posts, read 9,637,031 times
Reputation: 7614
Originally Posted by Mircea View Post
Well, you would say that just because you saw two birds in a tree.

You're all wrong.

Recessions never "just happen." There's always a causal factor.

The stock market is not now, nor has it ever been, nor could it ever be a factor and none of you could ever prove it is a factor so you can all put that silly nonsense out of your minds now.

Recessions happen because economic growth stops. Not only does expansion stop, it actually contracts.

The contraction is what results in negative GDP growth, rather than positive GDP growth. When the economy contracts for two consecutive fiscal quarters, we call that a "recession."

If an economy ceases to expand, it's because there is a bar to growth.

One such bar to growth is high interest rates.

All businesses borrow money to operate. All business have borrowed money to operate since the very first business opened in Mesopotamia 11,000 years ago.

All businesses have an account at a bank. That account is a revolving credit account, like a credit card, only different. Like a credit card, that revolving account has a credit limit and interest is charged on purchases. The interest rate is determined by the bank and the account holder's credit history and the Supply & Demand of credit and the prime rate set by the central bank.

You borrow money to buy "stuff." Stuff is raw materials, semi-finished goods and intermediate goods and you buy stuff whether you're making soap or TVs or cell-phones or cars or furniture or clothing.

You sell what you make, and that's your revenues, and you use your revenues to pay employee wages and benefits, your operating costs, and pay down your debt. Whatever's left is your gross profit and after you pay all of your taxes and regulatory fees, whatever's left is your net profit.

It's a little different for service providers. As a massage therapist you need to buy supplies, but you're not spending nearly as much as a cell-phone service provider who is buying microwave transceivers and the towers or renting space on a roof-top to mount them.

Contrary to popular belief, the profit margin of companies isn't 10,000%. The average is 10.7% and for many companies it's less than 5%.

When interest rates rise, it starts eating into profit margin, then your profits evaporate and then you're actually losing money, at which point the lay-offs start.

Laying off workers may seem counter-intuitive, but production is an art, not a science. It's easy for inventory to pile up and when it piles up it's necessary to lay-off workers until inventory draws down.

When interest rates are low, high inventories don't really matter much, although over the long-term they might.

Anyway, that's what caused the 1952-1953 Recession and a few others.

Another causal factor is liquidity. It's sometimes called a credit crisis or credit crunch.

It can be economy-wide, but that wasn't the case in 2008.

It can also be industry-wide, but that wasn't the case in 2008, either.

The next tier is sector-wide, and that was the case in 2008.

The credit crunch affected the housing market, but had no bearing whatsoever on the automotive industry, or the automotive parts industry, or the export industry, or healthcare, or telecommunications, or technology or retail or hospitality or grocery or manufacturing or anything else.

It only affected housing.

That wasn't the cause of the 2008 Recession, but the next factor, Capital reallocation, was.

The most obvious instance of Capital reallocation is demobilization after a war or major conflict. The 1946 Recession was caused by Capital reallocation.

The 1991 Recession was caused by Capital reallocation, too.

Bush had signed the IFR Agreement to withdraw the US VII Corps from Germany, so that was a clear and convincing signal that military contracts would be cancelled or reduced. You also had the INF Treaty requiring the withdraw of the Pershing II and BGM-109G missile systems, so Boeing and Martin-Marietta take a hit and have to lay-off employees. The German air force surrendered its Pershing IA's voluntarily, so Martin-Marietta takes another hit and more employees are laid off. Then Bush orders the withdraw of the Lance short-range ballistic missile system, so LTV takes a hit and has to lay-off employees, and Bush cancels the Pershing IIB follow-on to the Lance so Martin-Marietta takes another hit. And of course the Navy and Air Force get down-sized so there's even more cancelled military contracts and more job lay-offs.

Then comes the investors.

Investors are selling their stocks or calling their promissory notes because they see either no growth or limited growth in those companies and in that sector of the economy.

So, you have an 8-month recession while Capital -- money, labor, resources etc -- are reallocated and reintegrated into your economy.

Monetary Inflation and Wage Inflation are also causal factors.

Your first historic expansion of 106-months ended due to Wage Inflation. You had a double-dip and the second dip was more severe than the first, but nothing like the Great Recession.

Your second historic expansion of 120-months ended with a double-dip, too. Both were mild.

That expansion would have ended in 1997-1998 had it not been for Y2K Horror.

Everyone is hedging their bets.

Remember contract law is only concerned with performance. Either you performed, or you did not, and "I couldn't perform because Y2K cut me off from suppliers" is not an affirmative defense.

Case law says the only defense is natural disaster, since natural disaster is unforeseeable.

Y2K was foreseeable, especially since people had been yipping and yapping about it since at least 1995.

So, if you couldn't perform on a contract because you didn't stock up to hedge against Y2K then it sucks to be you.

And the hiring. All the software was in FORTRAN and COBOL and those guys all retired in the 1980s and everyone was trained in C language.

There was a massive hiring effort, not to mention a massive training effort to train enough people in FORTRAN and COBOL to re-write all the Billions of lines of code.

Your 2008 Recession was caused by Capital reallocation and a facet of that called Capital Flight.

Capital is not just being reallocated in the US, it was also fleeing the US for several years heading to China, Vietnam, Thailand, the Philippines et al which was the actual cause of the Great Recession.

If you have another recession, it's more likely to be caused by high interest rates, although Capital reallocation is a possibility. That might possibly be triggered by tariffs, then again it might not. Tariffs can also have an effect similar to interest rates.

Every product or service is bound by price elasticity. If you raise prices, any of the following can happen:

1) revenues and profits increase
2) revenues increase while profits remain the same or decline
3) revenues decrease but profits increase
4) revenues and profits decrease

What actually happens depends on the elasticity of the good or service, and that depends on availability of substitutes.
A couple of clarifications.

The National Bureau of Economic Research calls recessions based on nationwide metrics like GDP, unemployment, industrial production etc. indicating a slowdown that lasts more than a few months.

The old notions about "two consecutive quarters" haven't been used to ID recessions in many years.

The two most common defunct definitions:
"Two consecutive quarters showing an aggregate decline in real GDP" and "Two consecutive quarters showing an aggregate decrease in the rate of GDP growth" (a decrease in the rate of increase if you will). Simply aren't used officially.
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Old 08-08-2019, 10:28 AM
977 posts, read 581,594 times
Reputation: 2865
Your call center job is going to be replaced by AI or outsourced anyways. Seriously. The AI for call centers has come a long way and almost sound like a real person. They already are using bots for chat and is only a matter of time. An increase in minimum wage will likely push companies to replace their man power in customer services to AI.

Just move and do what you want to do. There is no reason to wait.
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Old 08-08-2019, 10:31 AM
Location: NJ
25,026 posts, read 31,215,475 times
Reputation: 17025
if you think its going to be so bad, just sell everything and put it all in SPXU. get rich while everyone else gets poor.
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Old 08-08-2019, 12:33 PM
Location: Tennessee
25,671 posts, read 19,077,442 times
Reputation: 30533
Originally Posted by MinivanDriver View Post
In 2008, the economic system had the real potential to collapse. No one has ever accused me of being a tinfoil hat alarmist, but I remember calling my wife and telling her, "I'm getting $10,000 out of our savings in case the banks shut down for a while." When things stabilized in late October, I put that money back in.

I do have to wonder how people can get suckered in by both political parties, given how they both don't give a tinker's dam about the deficit and the overall Federal debt. The answer to that is that neither political party has any ideology whatsoever. It's just a veneer. Instead, they are cartels of power that cater to their various clientele. GOP backers screech about the expansion of government while gleefully voting for W and Trump. DNC backers evidently believe in magical realism.

One of the great tragedies is that this country could have made real strides erasing the national debt in 2000 and let the opportunity slip through our fingers.
Agreed. Right now, the problems are not starting out in the financial services sector. This doesn't have the makings, at least not yet, to head the way of a financial panic.
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Old 08-08-2019, 12:44 PM
858 posts, read 519,064 times
Reputation: 1354
Deflation and Depression was scheduled to start back in 2001. A funny thing happened on the way to the 2001-PRESENT DEFLATION. FED intervention. The FED borrowed (stole) money from the future to spend today to keep the economy from deflating. This is the reason the FED was created; avoid deflations at all cost. It remains to be seen if they avoided deflation or merely delayed it at a massive cost.

Good Luck 👍
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Old 08-08-2019, 01:02 PM
4,803 posts, read 1,263,389 times
Reputation: 5688
Originally Posted by bawac34618 View Post
It looks like the party is over and we are about to have a recession. Do you think this will be as bad as 2008? Will it be worse?

I'm currently stuck in a dead end call center job in a town I hate and was planning on moving in a few months to a larger city in hopes of finding a better job and better life, but now I'm having second thoughts.
Some say: "The sky is falling!"

I say: "A broken clock is right twice a day!"
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Old 08-08-2019, 01:31 PM
6,027 posts, read 3,866,194 times
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Originally Posted by MinivanDriver View Post
Also, household debt service as a percentage of disposable income is at the lowest point it's been since the 1970s.

You know the adage that generals are always planning to fight the last war? People are always thinking the next recession is going to be like the last one.
Next one will be a “normal” recession, not 2008.

Spark will probably come from a hard Brexit or Chinese debt issues, which will infect the rest of the world.

trumps trade war is moronic and pointless, will drag on the economy, but won’t make it go into a recession.
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Old 08-13-2019, 04:45 PM
935 posts, read 274,692 times
Reputation: 1445
Things are getting pricey, but nothing bad will happen in the interim. The markets are only moving so the rich can get their shares at a discounted price in those areas.
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